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Is Trump Raj Trade Policy Narcissistic Populism?

Populism may be defined – and is, by none other than Pope Francis – as the use of the people for political purposes. It is utilitarian: the masses are an instrument to advance policy goals. When the goals are about a politician himself (it usually is a guy), or when he declares himself indispensable, then populism becomes narcissistic. So, “Narcissistic Populism” is mass manipulation to promote both the policies and power of one man.

Page two of the Trump Raj’s, March 2017 Trade Policy Agenda, spells out the President’s trade goals:

(1) defend U.S. national sovereignty over trade policy; (2) strictly enforce U.S. trade laws; (3) use all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services, and provide adequate and effective protection and enforcement of U.S. intellectual property rights; and (4) negotiate new and better trade deals with countries in key markets around the world.

Unless it impedes the goals, India gets scant attention in the Agenda. That is a shame, because burgeoning trade with India, and other developing countries, promotes American economic and counter-terrorist policies.

However, the point for now is to ask whether the first and fourthAgendaare Narcissistically Populist.

‘Defense of American trade sovereignty has failed, and better trade deals are needed.’There’s the populism.

No prior trade agreement has made America great. Each lays on a free-trade spectrum from bad to horrible. At one end is the North American Free Trade Agreement (NAFTA), which can be salvaged if America gets what it wants. At the other end is the Trans-Pacific Partnership (TPP), which must be crucified.

Delegates hold signs against the Trans-Pacific Partnership during the Democratic National Convention in Philadelphia, U.S., on July 25, 2016. (Photographer: Andrew Harrer/Bloomberg)

‘Apparently, one leader can defend American sovereignty and negotiate better deals.’There’s the narcissism.

That leader is the savior to atone for the sins of previous presidents. Never mind what America might have to give up in the inherently reciprocal bargaining of trade talks. Set aside the fact “even” Mexico has leverage: save for Canada, it is America’s second largest export market, and seventh fastest growing investor country in the U.S. Ignore what happened on March 14-15, 2017, when all other 11 TPP countries, plus China, Korea, and Colombia, met about FTA plans.

Narcissistic Populism works if people choose ignorance and slumber in confirmation bias.

So, consider three awakening rebuttals:

1. The Laws Of Probability Show Not Every Trade Deal Is Bad

And not every president who negotiated a deal was stupid.

Created during the 1986-94 Uruguay Round, the WTO legal regime now boasts 164 member countries, all of which adhere to its 19 multilateral treaties. Five American presidents, from both parties, were involved in haggling with other countries, and/or implementing, these agreements: Ronald Reagan, George HW Bush, Bill Clinton, George W Bush, and Barack Obama. Under these same five presidents, the United States negotiated, entered into, and now has in effect 14 FTAs since its first one in 1986 with Israel.

Think of flipping a coin. In theory, the choice is that a trade deal is either good (heads) or bad (tails). In practice, the Trump Raj Agenda suggests all of them are on that bad-to-horrible spectrum.

What are the odds that none is a good deal? For the WTO agreements, the odds are the same as flipping tails 19 straight times.

The answer is ½ to the power of 19, which is 1/524,288, or 0.0002 percent.

Same calculation for FTAs: the odds of America having entered into 14 straight lousy versus decent FTAs is ½ to the 14th power, or 1/16,384. Getting better: that’s a 0.006 percent chance.

As for the pre-Trump Raj maharajas who negotiated FTAs, assume the choice is smart (heads) or stupid (tails). What are the odds all five of them were, well …? The answer is ½ to the fifth, or 1/32. Still better: a 3 percent chance.

Populists take heart!
The odds every trade deal has been bad for America, thanks to negotiations a
dumb president conducted, are not as long as buying a winning lottery ticket.

Robert Lighthizer, U.S. trade representative nominee for President Donald Trump, testifies during a Senate Finance Committee confirmation hearing in Washington, D.C., on March 14, 2017. (Photographer: Zach Gibson/Bloomberg)

2. America Benefits From The WTO Dispute Settlement Understanding

Aside from the 1947 General Agreement on Tariffs and Trade (GATT), on which the WTO system is founded, the Dispute Settlement Understanding (DSU) is the “crown jewel” among the 19 WTO treaties. The DSU is the greatest international institutional mechanism in human history for rule of law.

A respondent WTO member cannot forever block a complainant member from hearings in front of a three-person ad hoc panel, or from an appeal to the seven-member standing appellate body. Interminable delays do not beleaguer the processes. That the DSU works is clear from the 517 cases brought under it since inception 22 years ago. The International Court of Justice (ICJ) has had 165 since its establishment in 1946.

That the DSU works is also clear from the high degree of compliance with panel and appellate body rulings. A WTO member that unsuccessfully defends its contested trade measure has an international legal obligation to bring that measure into conformity with WTO rules, typically within 15 months of the decision. Non-conformity triggers enforcement via compensation to, or if necessary trade retaliation by, the complainant. Each member appreciates it is a repeat player.

For a respondent to change its illegal measure today makes sense. Tomorrow, that respondent will be a complainant who can win, and will want the loser to comply.

That, plus reputational self-interest not to be branded an outlaw, are why compensation and retaliation are unusual.

America deploys the DSU more than the other 163 WTO Members, with evenly balanced missions. The U.S. has lodged 110 complaints, and fought 126 of them. Yet, among the populist gripes is WTO judges are anti-American. The narcissistic solution for the Trump Raj is that it decides whether to follow adverse rulings. At least, the Raj is consistent at home and abroad in intimidating “so called” judges.

The truth is that treaty interpretation rules that George W Bush and Bill Clinton inserted during the Uruguay Round fortify panelists and appellate body members against the temptation of judicial activism. The truth also is these judges are neutral experts labouring under tough constraints. The smarter gripe is their decisions are dilated, difficult, and dull. The prudent solution is to bolster their resources so they can do their jobs better.

3. A Win-Loss Mentality Is Too Simplistic For Most DSU Cases

Decisions under the DSU are not like “guilty or not guilty” verdicts in “Law and Order” episodes on TV. Trade cases involve multiple claims under two or more of the 19 agreements. As complainant, America prevails on some, but not all, of its allegations. As respondent, some of its defences crumble, others work.

Win-loss thinking is wrong-headed, and the overall quality of a victory, or damage from a loss, changes with time.

Here’s a 2016 appellate body case in point: Korea brought charges against the U.S. for anti-dumping duties (AD) and countervailing duties (CVD) slapped by the Commerce Department on Samsung washing machines.

America lost on the targeted dumping claim Korea made under the WTO AD Agreement.

America won on defining 98 percent of South Korean territory as “regionally specific” under the Subsidies and Countervailing Measures Agreement.

Long term, the win overwhelms the loss. Zeroing had a grim future. Regional specificity has a bright one.

Here’s how the WTO explains zeroing:

An investigating authority usually calculates the dumping margin by getting the average of the differences between the export prices and the home market prices of the product in question. When it chooses to disregard or put a value of zero on instances when the export price is higher than the home market price, the practice is called zeroing. Critics claim this practice artificially inflates dumping margins.

India brought a precedent-setting 2001 DSU case against the European Union, which zeroed India’s bed linen shipments. The EU complied. America could have avoided about a dozen foreseeable zeroing defeats by heeding India’s success, but Congress did not change U.S. law. The Commerce Department kept zeroing and fighting DSU challenges.

See, those lawyers were defending American sovereignty all along!

Ultimately, the Department opted administratively to stop zeroing in most disputes.

One of Ireland’s most celebrated poets, William Butler Yeats, wrote in The Second Coming, “The best lack all conviction, while the worst are full of passionate intensity.” The “best” need to think about the laws of probability and how the DSU works. Otherwise, they leave a void into which one man and his passion can wreck America’s trade deals and the WTO with the intensity of Narcissistic Populism.

Raj Bhala is Associate Dean for International and Comparative Law and Rice Distinguished Professor, The University of Kansas, School of Law. The views expressed here are his and do not necessarily represent the views of the State of Kansas or the University.

The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.